Oil's Surge Dampens Stocks

Bond yields hold near four-year highs as earnings season nears.
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Updated from 4:04 p.m. EDT

Stocks swerved to a mixed finish Monday as oil spiked at the start of earnings season and bond yields remained troublingly high.

The

Dow Jones Industrial Average

gained 21.29 points, or 0.19%, to 11,141.33, having traded as many as 65 points higher earlier. The

S&P 500

rose 1.12 points, or 0.09%, to 1296.62. The

Nasdaq Composite

was fell 5.75 points, or 0.25%, to 2333.27.

"We were still digesting the news from Friday as well as coming to grips with higher yields and oil prices today," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "We had very muted action today. The lack of volume was evident ahead of the start of the earnings season."

About 1.35 billion shares traded on the

New York Stock Exchange

, with decliners beating advancers by a 10-to-7 margin. Trading volume on the Nasdaq was 1.86 billion shares, and losers outpaced winners 3 to 2.

"Trying to pick a trend in this market is impossible," said Barry Hyman, an equity market strategist with Ehrenkrantz King Nussbaum. "Friday's action was anemic, and today there's anticipation of a stronger earnings season. Other than short-term traders, it's hard to negotiate a market that is so narrow in range. We're at least stable for now, but there hasn't been a trend for over a month."

The Dow stayed afloat thanks to gains of 1% or more in components

Alcoa

(AAS)

,

Boeing

(BA) - Get Report

,

Exxon Mobil

(XOM) - Get Report

and

McDonald's

(MCD) - Get Report

.

The 10-year Treasury bond was up 5/32 in price to yield 4.96%. The dollar fell against the euro and rose against the yen. On Friday, spiking bond yields spurred inflation jitters and profit-taking among

Fed

-obsessed investors, leaving the major averages roughly flat for the week.

Marc Pado, market strategist with Cantor Fitzgerald, said that Friday's nonfarm payrolls report forced up yields and raised the specter of two more quarter-point rate hikes.

To view Kara Wetzel's video take on today's market, click here

.

"The May 10 increase to a 5% fed fund rate now seems extremely likely, and the odds of a June 25-basis-point hike rose to 50%," said Pado. "This suggests that the 10-year yield should be at or slightly above 5% by May 10."

Year to date, stocks are solidly higher, with the Dow up 424 points, or 3.95%. The S&P 500 has risen 48 points, or 3.87%, and the Nasdaq is up 128 points, or 5.8%.

Those gains have coincided with a sharp run-up in oil prices, with front-month crude going from about $61 at the start of the year to a Friday close of $67.39. The nearly 11% gain reflects concerns about supply lines in several overseas hotspots and falling gasoline inventories domestically. May crude rose another $1.35 to close at $68.74 a barrel in Nymex floor trading.

The advance in crude oil boosted both the Philadelphia Oil Service Sector index and the Amex Oil index, up 2.2% and 1.4%, respectively.

"The price of energy should spook investors," said Hyman. "So far, the market is foolishly accepting of the price of oil without a negative reaction as long as it doesn't break out to a new high."

Precious metals pushed to their best levels in years. Gold futures finished up $9.10 to $601.80 an ounce, its first close about the $600 level since December 1980. Silver tacked on 49 cents to $12.56 an ounce, a 22-year high.

Alcoa kicked off the earnings parade with first-quarter numbers after Monday's close. The aluminum producer posted net earnings of $608 million, or 69 cents a share, up from $260 million, or 30 cents a share, last year. Earnings from continuing operations were 70 cents a share, ahead of the Thomson First Call consensus of 51 cents a share. Alcoa finished the session up 33 cents, or 1%, to $32.83.

Genentech

(DNA)

reports Tuesday, followed by

Circuit City

(CC) - Get Report

and

Advanced Micro

(AMD) - Get Report

on Wednesday.

It's also a reasonably big week for economic data, including reports on the trade deficit Wednesday and retail sales and consumer sentiment Thursday.

"There's a lack of economic news to start us off and we have a holiday-shortened week," said Pavlik. "People may be waiting on the sidelines until we get the first releases and earnings reports."

J.P. Morgan

(JPM) - Get Report

confirmed a deal Saturday to transfer its corporate trust business plus $150 million in cash to

Bank of New York

(BK) - Get Report

in exchange for 338 Bank of New York retail bank branches. The deal had been previewed in media reports a week ago.

Bank of New York fell $1.79, or 4.9%, to $35.04. J.P. Morgan added 18 cents, or 0.4%, to close at $41.88.

Swiss drugmaker

Serono

(SRA)

says it's no longer for sale. The company hired Goldman Sachs to solicit buyout offers but reportedly didn't see bids near the $15 billion price it was targeting. Serono says it will consider making its own acquisitions to expand. Serono slid $1.83, or 10.4%, to $15.81.

Walt Disney

(DIS) - Get Report

announced a plan to greatly expand Web-based broadcasting of television programs from its ABC unit. The initiative is the first time a major network has made prime-time shows available for streaming without major restrictions, although viewers won't be able to skip commercials,

The Wall Street Journal

reported. The stock added 26 cents, or 0.9%, to close at $27.79.

Cablevision Systems

(CVC)

announced a special dividend of $3 billion, or $10 a share, in a regulatory filing Monday. The stock was higher by 28 cents, or 1%, to $27.53.

UBS lowered stock ratings across the board in the semiconductor-equipment space, citing concerns about future orders. Names going from buy to neutral included

Applied Materials

(AMAT) - Get Report

,

KLA-Tencor

(KLAC) - Get Report

and

Lam Research

(LRCX) - Get Report

.

The research note pressured the Philadelphia Semiconductor Sector index, which lost 0.8%. Out of 19 components, 13 ended in negative territory.

Shares of

Rite Aid

(RAD) - Get Report

finished up 4.5% after Credit Suisse raised its rating on the company to outperform from underperform, saying the risk-reward profile was extremely attractive. The firm raised its stock price target to $5.50 from $3. Rite Aid gained 18 cents to $4.22.

Citigroup upgraded

Blockbuster

(BBI) - Get Report

to buy from hold, raising its price target to $5.75 from $4.50. Shares rose 31 cents, or 7.4%, to $4.50.

Overseas stocks were narrowly mixed, with London's FTSE 100 adding 0.7% to 6067 and Germany's Xetra DAX up 0.9% at 6003. In Asia, Japan's Nikkei fell 0.6% overnight to 17,457, while Hong Kong's Hang Seng gained 0.3% to 16,522.